Monday, August 31, 2015

When I think back over the life and work of Wayne Dyer, for some reason what I remember first is his advice on retirement. Perhaps it is because it was one of his farthest forays into my chosen field of economics. Retirement, Dyer insisted, was not something to aspire to, but a fraud that you were better off not participating in. It was a concept that powerful commercial interests would try to enroll you in, but your own interests lay elsewhere. At the risk of trying to quote from memory, he said something rather like, “Take the word ‘retirement’ out of your vocabulary.”

I was skeptical, but in the end, I became convinced that he was right. Mortality and disease statistics back up what he was saying. So many people die the year after they retire that it would seem you will live a happier life if you find a way to keep working in your old age regardless of what the institutional forces around you say you should be doing. If you are forced out of one job because of your age, you can take another. If no employer will have you, you can arrange for work on your own terms. Statistically speaking, that is the most reliable way to stay healthy and happy. But if the best strategy is to maintain and protect your ability to work for as long as you can, then what is the use of retirement?

Dyer himself never quite retired, though he lived to be 75. In his recent interviews, his message and advice continued to evolve as it always had. His web site lists 11 upcoming events, appointments he won’t be keeping. The last listed is a conference near me in September 2016, a keynote address that I surely would have attended. When I reflect on this, I ask myself, why wouldn’t you want to live your life such that your death represents not merely an occasion of sorrow but an actual, practical loss to the people around you? I think this is something to aspire to, rather than the commercial idea of an endless vacation. It you are inspiring people, solving problems, doing some kind of useful work that not just anyone can do, then after your departure, you will be missed in more ways than one.

Friday, August 28, 2015

Workers at HSBC in the U.K. were working late tonight to fix a failed payments system that had dropped an estimated 275,000 payments. Most of the payments were direct deposits of paychecks, so it was a high-profile gaffe from a bank that has faced more than its share of problems this year.

The U.S. Department of Labor has tentatively declined to recommend waivers for three giant banks that manipulated base rates, and in one case, also manipulated stock prices. Without the waivers, the banks will have to stop managing retirement accounts.

Bad loans are starting to pile up in China, according to the latest reports from the largest banks there. Construction companies have long been credit risks in China, but factories and retailers are starting to miss payments too as the manufacturing sector slows.

Bloomberg reported on a fake Goldman Sachs in China. A leasing company using the Goldman Sachs name, but not connected to the real Goldman Sachs, is said to have links to organized crime.

A credit union was liquidated today. State regulators in Iowa put SCICAP Credit Union, with around 1,000 members, into receivership. The NCUA then transferred most assets and member accounts to Community 1st Credit Union.

With U.S. fuel prices down by 1/3 since last year, you would guess that people were driving more, and we are, but not a lot more. Total vehicle miles as estimated by the U.S. Department of Transportation are up about 4 percent from the year before. That is enough to set an all-time record for the country, as population growth adds to the slight increase in individual driving.

The increase of 4 percent is barely enough to create an increase in the total amount of motor fuel sold. The countertrend of increasing fuel efficiency, which includes electric, natural gas, and hydrogen vehicles is probably enough to cancel out the increased driving distance in the long run. The replacement cycle for vehicles is also part of the fuel efficiency trend. When vehicles from the 1990s are retired and replaced with new vehicles based on current designs, fuel efficiency goes up. Of course, if the quantity of fuel is about the same, that means the revenue from fuel has declined by about a third from last year.

Thursday, August 27, 2015

A webcam at Barrow, Alaska shows coastal flooding from a moderate storm in the Arctic Ocean to the north. It is not a severe storm by Atlantic or Pacific standards, but Barrow was built on low-lying land. When Barrow was built no one expected the town would see the effects of summer storms because the sea ice that previously covered the Arctic Ocean would dampen any storm effects. In the last 20 years similar storms have threatened villages on the west coast of Alaska. Now with retreating sea ice, this effect has reached the north coast.

As sea ice retreats in future years and the sea waters warm, this kind of storm at Barrow will be a routine occurrence. It is easy to see that some buildings will need to be reinforced against the waves. In the long run, with a sea level rise of 7 meters on the way within 200 years or less, the entire town will eventually have to move to higher ground.

Wednesday, August 26, 2015

Imagine if Boston had taken on the Olympics, and imagine if revenue shortfalls and cost overruns had totaled $3 billion. Boston is a large city, but not that large. Taxpayers would be on the hook for $4,550 per person. Not everyone pays taxes, so the average per taxpayer would be higher. It is extremely difficult to make up that kind of shortfall through taxes. A special one-time tax on that scale would drive a significant fraction of taxpayers into bankruptcy, ruining the city economy and reducing future tax revenues. An increase in tax rates over an extended period of time would drive residents and would-be residents beyond the city limits, again reducing tax revenues. Boston would be stuck in a bind, most likely struggling for half a lifetime to keep up with its bills, much like Detroit, Harrisburg, or Puerto Rico. Each place is in a downward spiral created by government debt and taxes. Tax rates are high enough to drive taxpayers away, so that the growth that could solve the governmental fiscal problems can never arrive.

But wait. The likely cost overruns for hosting the Olympics would be much higher than $3 billion. The deficit could easily be $10 or even $20 billion. The Olympics are always more expensive than early estimates suggest, as Andrew Zimbalist notes in Harvard Magazine:

The risks are formidable, and London’s experience in 2012 is instructive. London earned $3.5 billion directly from the Games, yet spent more than $18 billion before factoring in infrastructure investments. Further, tourists stayed away . . .

London’s total Olympics deficit, then, was around $16 billion. But London is a very large city. It can arguably spend that kind of money. A $16 billion deficit in the Boston Olympics would have been made up by the taxpayers at a cost of $25,000 per person. That would have been a tax bill high enough to ruin the city for the next 50 years.

It’s no accident that Boston officials cited this very risk when they elected not to sign the papers for the Olympics. It is a little scary that they came as close as they did to going forward. We have a small group of determined activists to thank for averting this calamity.

Monday, August 24, 2015

The stock market gave every indication of a crash this morning, and I have been checking to see how the web infrastructure for Wall Street would fare. It has mostly held up, but the results are far from pretty. On popular sites you might wait ten minutes for the advertising on a page to load completely so you can get the stock quote. Five minutes after the open, I saw apps providing garbage data, partly from Friday, rather than the intended live data.

The trading day now looks more like a flash crash than the rout that was expected at 9:30, but if this is a stress test of Wall Street, it is abundantly clear it is not ready for a real crash. Even now, with volume falling back to an approximation of normal levels, there are data problems, pages that won’t load, apps that can’t get quotes. It is not a heavy traffic day on the Internet as a whole, so the bottlenecks are in the securities industry’s own data centers, and after today there should be plenty of data that shows which areas and connecting points most urgently need improvement.

Sunday, August 23, 2015

Just by using Spotify, you might be breaking the law. I realize that sounds far-fetched, but I’m not making it up. It is Spotify’s own new privacy policy that says so:

With your permission, we may collect information stored on your mobile device, such as contacts, photos, or media files. Local law may require that you seek the consent of your contacts to provide their personal information to Spotify, which may use that information for the purposes specified in this Privacy Policy.

Did you get permission from everyone you know before you signed up for Spotify? I didn’t think so. Pragmatically, though, it is clear that that clause is meant to shift the legal liability from Spotify to you, the user, if something should go wrong, such as a data breach at the Spotify data center. If Spotify screws up someday, how much do you suppose you will owe?

The draconian new privacy policy also gives Spotify permission to copy the photos and location data from your phone and show this information to advertisers. (Supposedly the information is de-identified, but we know by now that there really is no anonymous lifestyle data in a world where every individual life is unique.) Not surprisingly, a firestorm of protest has followed the policy changes, with the more cautious users canceling their accounts.

Saturday, August 22, 2015

Internet ad blocking has been around for a decade but is now becoming a trend. It is hard to measure accurately, but it looks like more than 10 percent of Internet ad impressions are now being blocked, roughly double the rate of last year. When ad blocking is discussed and analyzed, one curious factoid that is often repeated is that ad blocking rates are highest on video game sites. Supposedly this is because gamers are technologically savvy, but this explanation does not quite ring true. Engineers and computer programmers are equally savvy when it comes to using computers, yet we don’t see the same high rates of ad blocking at magazines and forums on these subjects.

I asked around and got some more convincing explanations.

People who play video games know the cost of momentary distraction better than most of us. In a game like Temple Run, if you sneeze or look away for a second or two, you’re dead. We all face the same loss of productivity when these distractions occur, but you have to play a video game to get the instant feedback that measures this loss for you and makes you aware of it.

Syndicated ads routinely transmit enough data volume to clog up the network connection for a few seconds. A two-square-inch ad can generate 30 megabytes of data for video, scripts, and tracking, and this happens not just when a page is loading, but at completely unpredictable times. The resulting network latency is the same kind of disaster for an online game as a sneeze is. In truth, we all face the same loss of productivity from ads, we just don’t notice it so easily in activities that are not so time-sensitive.

Video games have the most obnoxious ads you can imagine. A big hairy monster is ready to jump out of the screen and kill you and eat you RIGHT THIS SECOND. You are not quite human if these life-threatening moving pictures don’t upset you for at least a fleeting moment. You don’t have to be a gamer or know the first thing about computers to ask if there is a way to make these horrible images go away.

In short, we grossly underestimate the cost of the distractions that online ads pose. There are thousands of ads. In a day, the number of online ad placements you see can exceed the number of words you hear spoken to you. The degree of distraction that results is costly, but the potential for distraction is enormous. Billions of dollars are spent on basic research into making advertising more “effective,” which effectively means more distracting. Gamers are the canary in the coal mine, reacting first just because they are more sensitive to this issue. We all will have to react within the next few years to save our sanity. Ad blocking is one approach individuals might take. Avoiding computers, video screens, and the Internet is another.

Friday, August 21, 2015

With Greece’s bailout renewal secured, its prime minister is stepping down and calling new elections. It is a necessary step to hold the country together as it faces a changed agenda and a fractured political landscape, but it is also perilous, with the government still facing a crisis and less able to respond during the two months of political maneuvering.

I have been skeptical about the decline in oil prices because of the high cost of extraction, but there are indications of technical improvements in the last two or three years that are bringing costs of extraction down for many existing oilfields (drilling and fracturing aside). With U.S. oil prices down 50 percent from last year, dozens of energy companies in bankruptcy, and oil towns turned to ghost towns, there is some concern about whether a few banks might be at risk from this downturn. Banks could take losses not just from loans for energy extraction but also in real estate in formerly booming areas.

The stock market decline in China continues, with stocks losing 12 percent this week on new signs of weak manufacturing, along with worries over disruptions caused by a major industrial disaster in Tianjin. Stocks are down 30 percent from their peak. Banks will take substantial losses on stock market loans when individual stocks decline more than 50 percent. Banks also face collateral liquidity concerns with so many stocks frozen. It is expected that the central bank will ensure liquidity for banks with incidental losses on stock market loans, but will not attempt to save lenders that made stock market loans their core business.

Cecil Bank in northeastern Maryland is up for sale after receiving a prompt corrective action order from the Fed. The bank must do what it can to raise capital or find a buyer, officially within 90 days, but in practice, within a matter of months. A prompt corrective action order also bans dividends, restricts bonuses, and limits the interest rates the bank can pay on new accounts to prevailing market rates. The bank has $300 million in assets and 9 locations. Its financial condition has been in decline for at least five years.

The U.K.’s Co-op Bank reported a first-half loss of £204 million and says losses will continue for two more years before it can return to profit. Regulators last week waived a £120 million fine for prior sloppy technical operations. The fine would have put the bank close to insolvency, and the responsible executives had already been replaced. The bank has closed a third of its branches in the last year in a cost-cutting move, and the cost of branch closings is part of the explanation for its losses.

In a series of class-action settlements, U.S. retailer Target will reimburse cardholders for a tiny part of the inconvenience resulting from the mass leak of personal data from the store network in November and December 2013. Each cardholder affected will receive about $1.14.

Monday, August 17, 2015

I thought I was the exception in taking only short and infrequent vacations, but a survey by Allianz finds that less than half of Americans have taken a full week away from both home and work in the last year. Geoff Weiss summarizes the study and discussion at Entrepreneur:

There is a common confusion surrounding vacation in American English, with the same word meaning both a day away from work and a period of travel away from home. Both are important, but the discussion surrounding this new vacation study conflates these separate issues. The study itself seems to share in this flaw by focusing mainly on people who hold the same full-time, salaried job all year long, which of course is the exception rather than the rule. Many workers can’t go away on a vacation because many U.S. jobs allow just 10 vacation days per year, and these few days off can easily be used up with home and auto repairs and health care. Not everyone takes all their allotted days off from work, but those who do may stay home because of the cost of travel.

In my case, I have traveled so much for work in the last few years that travel for pleasure seems, for the moment, like a contradiction. Having a mortgage to pay also makes me reluctant to borrow more money for something so obviously optional as travel. One of the ironies of the American system is that the people who have the most time for a vacation, because they have become unemployed, can rarely get away for more than a couple of days because of both the cost of travel and the rules surrounding unemployment compensation.

Even with all these caveats, it helps to know that the traditional idea of a vacation, a week or more away from home and work, is the privilege of a lucky few rather than a universal experience — at least in the United States. If you haven’t had a “real” vacation in a long time, that is also true of most of the people around you.

Sunday, August 16, 2015

A longitudinal study of New York summer jobs programs found that the summer jobs led to reduced rates of death and incarceration looking back after about 8 years. The magnitude of the effect was impressive, with a 20 percent lower death rate resulting from summer jobs that typically lasted just six weeks. The story at CNN:

Despite the limitations of this study, it is cause for concern about the long-term effects of recession on teenagers. In a recession summer jobs are scarce and are more likely to be taken by unemployed adults, creating a cohort of teenagers most of whom won’t have had the experience of a summer job.

Friday, August 14, 2015

The next step in the Greek bailout is agreed to, with Germany admitting late tonight that it had run out of excuses for foot-dragging. The loan includes enough money to keep the banking system operating.

Citizens Bank was pocketing customer deposits when there were errors on handwritten deposit tickets or when its scanners read them incorrectly, cheating its customers out of at least $14 million. The bank recorded the pilfered money as rounding error in its books. Now the bank has agreed to return the money to its owners and pay $20 million in penalties. It is the first time regulators have faulted a bank for deposit processing.

GE is selling its online bank to Goldman Sachs. Terms of the deal were not disclosed.

Deutsche Bank employees were charged with criminal tax fraud in connection with carbon emissions trading in Germany. The seven employees were suspended by the bank after the charges were filed. One former employee was also charged and faces extradition from the United States. The carbon trade in Europe has been subject to a wide range of fraud, and this case may involve traders collecting VAT from buyers, then recording the trades as occurring in a jurisdiction without VAT and pocketing the collected taxes. More than a dozen people have already been convicted in similar schemes.

Thursday, August 13, 2015

Japan has gone back into nuclear power. After two years of cold shutdown for safety improvements, the first nuclear power plant restarted this week. The restart comes with considerable trepidation and has been the topic of heated discussion for months, an unusual occurrence in Japan’s usually more reserved political life. Importing oil cannot be the ultimate answer either, but do we really want to be so dependent on an energy technology that renders whole cities uninhabitable?

It looks like some of the trepidation around the energy supply has translated into consumer behavior. People might think that if they consume less in general, it reduces the need for the risks of nuclear power. Though not everyone will arrive at that connection through logical analysis, the logic is nevertheless correct. There is only a small decline in Japanese consumer spending in recent months, less than 1 percent, but that is enough to make a difference when you measure the direction of a national economy. GDP is expected to show a decline for the latest quarter when that report is released on Monday.

Some of the hesitation will fade after the first few nuclear plants have been humming along for a few months, but I have started to wonder about a longer-term trend away from consumption in favor of feel-good abstractions like peace of mind. This is the theme I have started to explore in the China Crash blog, focusing on China because if the world is turning away from manufactured products, the effect will show up in the world’s biggest manufacturing nation first. There are signs of a slowing pace of manufacturing worldwide, but only China, Russia, and Greece (three countries facing serious financial problems) appear to have actual declines.

The book Fear of Nothing is seven years old now, and one of the points I argue in that book is that we can’t keep consuming more and more products. We already use only roughly ten percent of the material possessions we have at home, and if we keep adding more and our houses fill up with stuff we will run out of space to live our lives. Most of us in North America and Europe have reached the point where the need for space is more urgent than the need for more stuff, and that has to affect the way people shop. Since 2008, we have seen a trend toward smaller houses in the United States, and whole categories of products keep getting smaller (especially televisions and computers). The long-term trend toward more stuff and bigger houses has already been interrupted.

I experience some consumption hesitation myself when I consider that most of my electricity comes from nuclear power stations and coal-burning plants and I pause to turn out the lights. It is an experience common enough that conservative commentators in the United States regularly make a point of cautioning against this kind of thinking, telling listeners, for example, not to limit their driving distance or replace their legacy light bulbs. If consumption hesitation has become so commonplace that it is part of the social conversation, perhaps it will shortly become a measurable worldwide trend.

Wednesday, August 12, 2015

“We’ve gone all-in with LED lighting,” Ikea says, making it (in September) the first major U.S. retailer to eliminate legacy lighting technology from its shelves. The move comes as the price for 13-watt white LED bulbs, the brightest you would likely ever use in a house, falls below $11, making it hard to justify the higher costs of legacy bulbs. For comparison, a 19-watt CFL bulb may use $9 in electricity per year, lasts only 7 years, and produces inferior light at that, not exactly living up to Ikea’s reputation for practicality.

A few other retailers will follow Ikea’s lead by next year, but legacy lighting won’t disappear quickly. Hardware stores and supermarkets will be reserving shelf space for incandescent and CFL bulbs for at least another ten years.

Tuesday, August 11, 2015

Pending approvals, Greece finally has the bridge loan it has been seeking since March. But instead of the €7 billion Greece needed then, for perhaps as little as one year, the new loan is €86 billion for three years. The €79 billion difference and two extra years reflect the damage done to the economy in Greece by the delay. The national economy went, in three short months, from an even-keel recovery to depression-level functioning in which it was briefly dependent on international food aid. For the eurozone, the delay not only means a higher funding level for Greece right now, but also means it will take three to five extra years of work before the eurozone can be considered stable again, including an increased risk that that task can never be accomplished.

This is not merely a lesson in taking action when the time comes, though. The core eurozone countries have privately profited from the problems in Greece. They have swept up much of the money flowing out of Greece. The German government alone is estimated to have saved €100 billion in interest payments already from the flight-to-safety effect, with private borrowers in Germany saving considerably more than that. Employers across the euro zone have been able to hire skilled workers away from Greece at salaries considerably lower than the free market would have allowed. It is a case of, if not actually manufacturing a crisis, at least prolonging it so that the rich can get richer while the poor get poorer. When naysayers claim that the eurozone is being managed like an empire, this is the kind of effect they are talking about.

Of course, we have seen the same principle in action elsewhere. The mostly manufactured sense of crisis since 2007 in the United States has been hugely beneficial to Wall Street banking, the Detroit automakers, and the fossil fuel sector. In the last case, now that the crisis is fading, coal and oil companies are showing that they may not survive without the chaos windfalls they’ve enjoyed in recent years. More broadly, wherever you see state capitalism, you will find crisis upon crisis as the most well-funded business interests rush to position themselves to profit from the confusion and suffering of everyone else.

Friday, August 7, 2015

The theft of $1.5 billion from three banks in Moldova remains a mystery, but what has become clear is that the scheme, originally seen as a vast conspiracy of hundreds of shadowy companies, was substantially carried out by a single well-financed person who had detailed knowledge of banking regulation and ties to Russia, Ukraine, and Britain. The money was taken away over a two-year period through loans to nonexistent businesses, then in one weekend, most of the documents and records were destroyed. Today the central bank ordered the three banks involved, Savings Bank, Social Bank and Unibank, to close. They are immediately prohibited from opening new accounts, and they will be wound down and deposits transferred to other banks in October. The three banks hold 30 percent of the deposits in Moldova, and the scale of the losses has resulted in unpaid government salaries and the closing of public services including hospitals.

The largest U.S. banks are reducing their office space. JPMorgan Chase is vacating a building in New York, moving some jobs to New Jersey. Bank of America will not be renewing its lease on four floors of an office tower in Charlotte.

Promontory Financial Group LLC is effectively banned from advising banks in New York State after regulators looked over the group’s advisory documents, particularly those on money laundering transactions done by Standard Chartered Bank for businesses based in Iran. Regulators found that reports were routinely revised to cover up signs of misconduct at banks. Promontory says regulators don’t have any authority over its work and is preparing a legal challenge to the order.

Standard Chartered Bank reduced its dividend by half and said it would seek additional capital if needed.

U.S. banks had asked the Federal Communications Commission (FCC) to relax rules on telemarketing so that they could place robocalls to cell phones of customers and prospective customers without the customers’ permission. However, the FCC let the existing rules stand and adopted an interpretation that specifically prohibits such calls. Nothing in the telemarketing rules prevents banks from contacting customers by phone, but calls to cell phones cannot be placed by machine.

Guilty: Tom Hayes, a trader at UBS and Citigroup, was sentenced to 9 1/2 years in prison after being convicted of leading an international syndicate that rigged Libor rates. Hayes continued his rate-rigging scheme even after learning that he was facing a criminal investigation. Hayes had little to offer in his own defense, admitting that he routinely requested false rate reports, but claiming that this was a standard practice at both banks and that he never gave any thought to the consequences of his actions. Hayes was found guilty on all eight charges he faced in the first Libor case to go to trial.

The NCUA liquidated New Bethel Federal Credit Union in Virginia. It had been in conservatorship since April 30. It had 172 members.

Thursday, August 6, 2015

The U.S. coal industry is in long-term decline according to an analysis by Keith Goldberg at Law360. Four major U.S. coal mining companies have filed for bankruptcy protection this year, but bankruptcy does not provide an easy way for coal companies to avoid the high costs of operating a coal mine. The costs continue after a mine is closed, with the cost of cleaning up the mining site and the ongoing costs of health care for miners. These are costs that coal companies pay only about half of, but that still may be more than some of them can afford.

The market price of coal has never covered all the costs of coal mining. For a recent example, see a coal mining project in Australia that was approved only because regulators illegally disregarded some of the costs. The only solution when production costs are too high is to start to phase out the less favorable mines. That will be a difficult transition for an industry that sees itself as expanding, but it is hard to see where new markets for coal will be found. As it is, coal is too expensive as an energy source to use for much beyond generating electricity and making steel. In electricity, coal is squeezed by falling prices for natural gas and solar. We have already seen aging coal power plants shut down in cost-cutting moves, and this will affect more and more of the electricity supply as solar installation prices fall. Official policies in the two largest coal-consuming countries, China and the United States, point toward a phase-out of coal within the next 80 years. This combination of market forces and official policy have already created a glut of coal in the international market. Facing high costs and declining demand, some of the coal mines that fall into bankruptcy this year and next will ultimately have to shut down.

This is a highly credible study because of its size, with half a million participants, and its duration, with some participants recorded for as long as ten years. However, the mechanisms by which spices are associated with better health are not known.

The researchers speculated about a link to capsaicin, the primary cause of the hot effect of peppers and several other spices. One possible mechanism could be that capsaicin and other components of spices might kill fungi, bacteria, and other parasitic organisms inside the human body, but even this obvious theory has not been well studied. Capsaicin and curcumin, another common spice component, have antioxidant effects that have been measured, and peppers contain other known antioxidants, including vitamin C. The antioxidant effect might provide part of the explanation. Another possibility is that the nutrients in peppers and other spicy vegetables, which include vitamins, minerals, and enzymes, are an important factor. But the answer could also be as simple as hydration, if spicy foods prompt eaters to drink more water.

Monday, August 3, 2015

There is a trend toward more durable products, and one way this is seen is in a downward trend in manufacturing volume. Recent statistics point to actual declines in manufacturing in only a few places, but one of those places is China, the world’s biggest manufacturing country and a place where we came to expect rapid growth every year.

The durability trend can be seen everywhere you turn. These are a few examples:

The no-new-clothing fashion trend of 2009-2011, made possible by the large amount of not-worn-out clothing in the closet

LED light bulbs, which may last nearly as long as the sockets they attach to

Today’s sustainable-energy announcement from the White House, which emphasizes electrical generation technology that last longer than traditional fuel-burning power plants

The 20-year-old cars on the road, as common as 10-year-old cars were a generation ago

Laptop computers that last 5 years instead of 18 months

The widespread replacement of tape with disk for information storage a decade ago, and the current move from disk to flash memory

The prominence of manufacturers that design for durability, such as Apple, Toyota, and Ikea

Batteries that promise longer life

Advancements in glass for greater impact and scratch resistance

A resurgence in hardcover books compared to paperbacks

In general, durability leads to a decrease in manufacturing, as products are not replaced as often. The higher prices of the more durable designs may partly make up for this but can never fully cover the decline in manufacturing volume. A greater reliance on durable goods tends to lead to geopolitical stability, as the timing of product deliveries is no longer so sensitive. On the other hand, as goods become more durable, purchases are more easily postponed, and this might to a more pronounced business cycle as people facing financial pressure may cut back sharply on spending.

Consumers will insist on improved durability in categories such as tools as they own more and more manufactured products. In the last century, consumers have gone from owning around 100 items to owning around 10,000. Replacing 10,000 items every couple of years would be too much to ask, so products will have to last longer.